Greece outlines plan to ease bailout burden

ATHENS (Reuters) - Greece wants tax cuts, extra help for the poor and unemployed, a freeze on public sector lay-offs and more time to cut its deficit under a plan likely to run into strong opposition at a European Union summit next week.

The new coalition government's program, seen by Reuters on Saturday, reflected public pressure to ease the terms of a 130 billion euro ($163 billion) bailout saving Greece from bankruptcy but only at the cost of harsh economic suffering.

If implemented in full, the new program would undo many austerity measures the country agreed in February to clinch the bailout package, its second since 2010.

Euro zone partners have offered adjustments but no radical rewrite of the bailout conditions, with paymaster Germany particularly resistant to Greek calls for leniency.

Greece's program includes a call for the recapitalization of the country's fifth-largest lender, ATEbank - a state-owned agricultural bank that EU sources said this month was among several lenders the European Commission wanted to be wound down. The finance ministry has denied that report.

The program, agreed by leaders of the three-party coalition after a June 17 election, faces its first test at a two-day EU summit starting next Thursday and sure to be dominated by the debt crisis that started in Greece and is now threatening to engulf Italy and Spain, the euro zone's third and fourth-largest economies, respectively.

Inspectors from Greece's "troika" of lenders - the EU, European Central Bank and International Monetary Fund - were due in Athens on Monday to review the country's progress.

Euro zone officials have said the bailout package should be revised only to reflect time lost on two elections since early May and a deeper than expected recession.

"The general target is for there to be no further reductions in wages or pensions and no more taxes," the Greek government program said.

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It called for a cut in the 23-percent value-added tax (sales tax) rate for restaurants and farmers, a freeze on lay-offs in the bloated public sector and for unemployment benefit to be paid for two years rather than one.

The government will also ask for two more years, until 2016, to cut its budget deficit to 2.1 percent of national economic output from 9.3 percent in 2011, an extension that would require extra foreign funding.

The lowest income tax threshold should be raised, the document said, and the minimum wage - cut by 22 percent in February - revised in line with agreements between employers and workers.

The program also calls for the accelerated payment of 6 billion euros of government debt to suppliers.

The coalition brings together the conservative New Democracy, Socialist PASOK and Democratic Left in an alliance that will face constant pressure from an opposition led by the radical leftist Syriza bloc.

Led by charismatic ex-communist Alexis Tsipras, Syriza surged into second place in the election on a vow to tear up the terms of the bailout.

Conservative Prime Minister Antonis Samaras, a Harvard-educated economist who switched from opposing the first bailout to reluctantly supporting the second, has promised to soften the terms without jeopardizing Greece's place in the euro zone.

"Though the troika will be in Athens on Monday, the crunch test will be Thursday's EU summit," the centre-left Ethnos daily wrote in an editorial on Saturday.